Deal reached to avert U.S. port strike for now

A reach stacker operated by a longshoreman, right, places a shipping container on a tractor trailer truck at the Port of Boston, in Boston. The longshoremen's union may strike if they are unable to reach an agreement on their contract that expires Dec. 29.

NEW YORK —A union representing dockworkers on the U.S. East Coast and an alliance of shippers have reached a labor agreement that will avert a strike that threatened to wreak havoc on the United States’ economy.

The International Longshoremen’s Association (ILA), which represents 14,500 workers at 15 container ports in the eastern United States, and the U.S. Maritime Alliance (USMX) of shippers, terminal operators and port authorities, have agreed to extend their current contract by 30 days to finalize details, the Federal Mediation and Conciliation Service said in a statement on Friday.

Both sides have agreed “in principle” on the contentious issue of royalty payments for shipping containers, payments to ILA workers based on the tons of container cargo that move through a port.

The statement on Friday was light on details of the actual agreement, and the USMX declined to comment further.

The new contract does not eliminate the royalty payments, according to Benny Holland, an executive vice president for the ILA.

“The royalty will stay intact. We have worked out a formula for it,” he said in an interview.

Established in 1960, the royalty payments to ILA workers are based on the tons of container cargo that move through a port. That tonnage has risen from 50 million tons in 1996 to 110 million last year, according to the alliance. Total payments last year were $211 million, according to the USMX, or an average of $15,500 per worker.

The original idea of the royalty payments was to protect longshoremen from wage losses expected as a result of “containerization,” in which more and more goods are packed in the now-familiar 20- and 40-foot long boxes. Those take less manpower to off-load than the less-standardized containers they replaced.

Both sides also fought over the guaranteed eight-hour workday in the current contract and the seven-man “lashing gang.” Lashing crews, or gangs, secure the cargo containers to the vessel using metal lashing rods to keep them from moving while the vessel is at sea. The maritime alliance wanted to eliminate each.

A long-term agreement has an 80 percent chance of happening by January 28, Capital Alpha Partners analyst Loren Smith said in a research note.

The agreement comes as union forces felt emboldened by recent victories by other unions across the United States. At the same time, shipping companies and port operators have been using more automation, and have seen profits shrink. The Baltic Dry index, which tracks the cost to ship materials overseas, is down 55 percent in the past year and currently at levels it hasn’t been in a decade.